Trump's Boeing Love Creates Contradictions
As President Donald Trump visited a Boeing Co. factory two weeks ago and pledged to "fight for every last American job," the aerospace giant was working on cutting more than 1,000 positions.
Boeing has earned multiple pats on the back from Trump in the past few weeks including a "God Bless Boeing" acclaim at the end of that South Carolina speech, while its CEO Dennis Muilenburg has become downright chummy with the president. In light of Trump's America First agenda, it deserves some of that praise: Boeing is the largest U.S. exporter and pays good wages for high-level manufacturing work. And yet, Boeing's employment numbers aren't exactly moving in the direction that a president who bills himself as a job saver might want. 1
In December -- a full two months before Trump's effusive praise on the factory floor -- the $113 billion plane maker told employees that tough competition and fewer sales opportunities in commercial aerospace after years of booming demand would force it to ramp up layoffs. A plan to trim 8 percent of that division's workforce in 2016 implied 6,600 job cuts. On Thursday, we learned some details as to how many more positions could be eliminated this year: Boeing approved 1,500 voluntary layoffs for mechanics, while 305 engineers and technical workers are also leaving voluntarily, per Bloomberg News.
Boeing has said it may also have to consider involuntary cuts. Who knows how many jobs might eventually be rendered unnecessary by the robotics and automation Boeing's CEO said this week are crucial to new product innovation and maintaining U.S. leadership in aerospace and defense. 2
Boeing isn't doing anything wrong. To keep paying workers that it doesn't need flies directly in the face of free-market capitalism and would surely irk shareholders who are already worried about cash flow and margins. And it does need to invest in technology and automation to make its business more efficient and stay competitive. It's just another reminder that corporate realities will likely force even Trump-approved companies to make decisions he doesn't like.
“Our strategy has been to build where we sell product, and so we build Chinese product in China. I think if there was a desire to build that product in the U.S., I don’t know that the Chinese would be all that excited to accept it back in China.”
Beyond that, the manufacturing jobs that Caterpillar provided 40 years ago just don't exist anymore because of automation, she said.
Trump may have other reasons to be disappointed in Caterpillar these days, after multiple government agencies raided the construction-machinery maker's offices this week. The raid appears at least partly connected with a probe into Caterpillar tax policies that a Senate investigative committee in 2014 found allowed it to avoid paying $2.4 billion in taxes. Caterpillar told the committee it had complied with U.S. tax laws and now says it's cooperating with authorities. While Trump has acknowledged he used legal loopholes to avoid paying personal federal income taxes, he's also said that companies that pursue other tax-saving moves like inversions "have no loyalty to this country."
There's a pattern of contradictions here. Broad promises to save every U.S. manufacturing job could actually work against Trump's objective to make America "start winning again." Perhaps Trump himself has realized this and that's why we haven't heard any Twitter rants about these Boeing job reductions. He also seems to have backed off -- or forgotten? -- earlier criticism about Boeing's "massive" plant in China. (It's not massive). 3 While Trump lamented the loss of factories since China joined the World Trade Organization to a joint session of Congress this week, he's had no specific public words for Boeing or Caterpillar on this matter lately.
Except the broad platitudes keep coming and in the end, that's hampering a real discussion about the effect of globalization and technology on manufacturing and the investments that are needed in education and training. Tax reform and fewer regulations alone aren't going to cut it.
The closest thing Boeing has had to a big-league jobs announcement since Trump's election victory was a December proclamation that Iran's national airline's order for 80 aircraft would "support" nearly 100,000 U.S. jobs within "the U.S. aerospace value stream." Translation: thanks to this new influx of money, there's now less of a risk that 100,000 people employed at Boeing or its suppliers will have to be laid off.
If Trump succeeds in ramping up defense spending, that could create jobs in other parts of Boeing's business. But the potential for a defense-related stimulus hasn't stopped him from attacking other companies' job plans (see: United Technologies Corp.'s Carrier division).
Boeing builds airplane interiors specifically designated for that market and the billions of dollars in sales Boeing has gotten from China over the years help support U.S. manufacturing jobs.
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